Absent Teutonic market pressures that ECB action relieves, Rome may keep on its current path. (The failure of the government to move ahead with needed policy adjustments has led to a short term for Carlo Cottarelli, the IMF’s former Fiscal Affairs chief, as Italy’s budget watchdog. He’s announced an October departure.)

Perhaps like others in Europe, the IMF has consistently been optimistic about Rome’s ability to make the tough economic changes necessary to spur growth and cut debt levels. As a result, the fund’s also been consistently wrong. Its median forecast error for the past eight years is 1.6 percentage points above actual gross domestic product growth.

“While growth outcomes in Italy have sometimes tended to be worse than projected, the current growth projections are in line with consensus but below the authorities’ forecasts,” the IMF said in its latest annual economic review of the country.

At least for now. But the fund is honest about the risks. Deep structural changes—such as simplifying labor contracts and a more efficient judicial system—are urgently needed to secure a recovery and spur growth, the fund warns.

“The risks are tilted to the downside,” it adds. “Italy’s high public debt, large public financing needs and elevated [nonperforming loans] leave the economy vulnerable to financial contagion and/or low growth and inflation.”

Three years of Europe’s third-largest economy shrinking has pushed debt levels dangerously ever higher. It’s not a negligible risk for the rest of the continent, or for the global economy.

The IMF has had to repeatedly push its forecasts of peak debt higher and farther into the calendar, a mountain of obligations that risk overwhelming the country’s ability to pay in the years ahead, especially if the government can’t generate the political momentum for a raft of economic policy reforms.

Without structural changes to the economy, the fund projects Italy’s debt will continue to rise:

And so will the country’s need to raise more cash:

Italy has been somewhat insulated. First, by Europe’s bailout facilities and the ECB’s vows to “do whatever it takes.” Secondly, Italy’s debt has a long-term structure, meaning there aren’t immediate financing needs.

But, the IMF warns, the country remains vulnerable to a loss in market confidence given the size of its refinaning needs, which would push up borrowing costs. As the past several years have shown, it’s also exposed to growth shocks such as those that could come from the Ukraine/Russia crisis.

“In addition to being a drag on economic growth for the region and beyond, further unrest could also trigger large spillovers on activity in other parts of the world through a renewed bout of increased risk aversion in global financial markets, higher public spending or revenue losses, or disruptions to commodity markets, trade, and finance,” the IMF told global finance leaders Wednesday.

In stress tests, the IMF estimated that Rome’s debt trajectory could hit nearly 150%—up 15 percentage points from current levels—if Italy’s economy were to contract by an average of 1.3% over the next couple of years or if a banking crisis forced the government to bail out the financial industry.

Given that such a scenario would likely send shockwaves around the world, Italy’s sluggish efforts to restructure its economy are likely to be a topic at the Group of 20 meeting this weekend in Australia.

A senior U.S. Treasury official recently told reporters Europe’s lackluster growth would be a top priority at the meeting. “We’ve emphasized the need to boost domestic demand in Europe, and we’ve underscored that it will require implementation of more accommodative measures across the full range of macroeconomic policies,” the official said.